Farming is a very important question.
Obviously trucking products from a farm half way around the world cost a lot in energy demands. There is also the very important question of exploitation of the land, e.g. some crops make land infertile. Also the importance of taking carbon dioxide out of the air and putting it into the ground. There is also the importance of replacing animal protein with vegetable protein in our diets.
All this seems to me to imply that we have to not let what is going on be up to the market place. Perhaps it is easier to endorse the last idea if we look at China as an actor in the marketplace who may not have our best interests at heart. Obviously they are not the only potential bad actors. So I am interested in the larger question. How do we get an American Policy on these issues. Obviously the Chinese Communist Party has a policy.
China is Coming for American Farms | Opinion
While Washington's growing focus on "great power competition" with China is expanding to encompass things like research and development, semiconductors and manufacturing, so far it hasn't seriously addressed one element: American land. At the expense of American landowners, farmers and companies, Chinese corporations have been buying up valuable land for years. This increased ownership isn't merely about commercial transactions. It also compromises national security because it essentially hands over the supply, distribution and processing of our food supply to a hostile adversary with little oversight. It also puts land-seeking Americans at a disadvantage on their home turf. After all, how could they, as private citizens, ever hope to compete with Beijing's deep pockets?
Records from the Agricultural Foreign Investment Disclosure Act show that Chinese acquisitions "rose from less than 10 annually" before 2008 to "12 to 25 each year during 2008-13." In 2007, China bought six farms, all in California. The next year, they had bought 30 outside California, in Arizona, Texas and Missouri.
This strategy, outlined in an official Chinese Communist Party (CCP) 2013 food security initiative, encourages Chinese companies to gain greater control over agricultural supply chain imports. Moreover, Beijing has backed up this priority financially, utilizing its assorted state-connected financial institutions. The Agricultural Bank of China has stressed that it has "fully met the financial needs of the 'Going Global' of enterprises in agricultural cooperation."
The biggest Chinese agricultural investment in the U.S. came in 2013, when the Bank facilitated the largest acquisition of an American company to date: the $4.7 billion purchase of Smithfield Foods, the world's biggest pork producer, by the Shuanghui Group. The 146,000 acres of land that Shuanghui thereby gained made it one of the largest foreign owners of U.S. property.
But Beijing hasn't stopped there. Currently, ChemChina, an agricultural state-owned enterprise, is attempting to take Swiss firm Syngenta, the world's largest crop protection maker and third-biggest seed supplier, public. Its value? $50 billion. More importantly, while Syngenta is a Swiss company, it operates multi-billion dollar farm sites across 16 U.S. states, invests in research and development yearly, employs over 4,000 Americans in 41 states and views the U.S. as its top market. Its stake in American farmland is thus critical, and China knows it.
One of the operative assumptions during my lifetime, perhaps a bipartisan assumption but I consider it to be, at its core, a conservative assumption - is that free trade makes the world a safer and freer place, by creating webs of mutual obligation and economic dependence between parties who might otherwise be enemies of one another. It is in this spirit that China has been welcomed as a trading partner by the West over the last 40 or so years: the expectation was that, as China prospered, its people would demand more freedoms. The Chinese Communist Party would somehow be superseded.
ReplyDeleteAt least so far, events haven't panned out that way. China has cracked down on Hong Kong freedom protesters with violence and imprisonment. Chinese treatment of its Uighur minority may amount to genocide. Other dissidents and minorities also are mistreated. China has become more prosperous, but freedom and human rights haven't followed as hoped/expected. China still is our adversary today - an adversary who is aggressive and powerful. Has the freedom-follows-prosperity theory been discredited? It certainly hasn't succeeded for China.
If it has failed - then what is the alternative policy? It seems clear that multinational corporations won't willingly give up the Chinese market - which, for consumer goods, may be the most desirable in the world. The US economy depends on Google, Apple, Disney and many other large corporations with strong commitments to China, both as a market to sell their goods and services and as a source of inexpensive labor.
Jim: One of the operative assumptions during my lifetime, ...is that free trade makes the world a safer and freer place, by creating webs of mutual obligation and economic dependence between parties who might otherwise be enemies of one another
DeleteJim, I felt the same way, and still feel the same way. I'm very big on free trade and free financial and capital flows. I'm in favor of globalization (with a few restrictions) along with freeing the factors of growth, which, combined, have lifted millions out of poverty. An imperfect system, but one with a net benefit to the world's people. (some pain to some domestic industries though - unavoidable, but it could have been better planned for and mitigated).
However I never assumed that this would automatically create a more democratic society in China, Russia or elsewhere. Both have had to give more freedom because profit-making capitalism requires a minimum amount of freedom. However, the Chinese, Viet Namese, Russians etc have worked to permit enough freedom to grow the economy with maintaining strict authoritarian control of the political environment. This does not surprise me.
I was hopeful that the economic interdependence would make the world just a tiny bit safer. I think it has, even if not perfectly. Greed runs the world, essentially. It is often noted that China owns a very large amount of US Gov debt - some worry about this - what if they pulled their money out? Well, a couple of things mitigate against this possibility - first, our authorities could simply freeze the accounts - which could also start a war. This would compound the financial losses - the money locked up AND the country devastated by war (ours too). So, it's sort of a financial version of MAD.
THus it's unlikely that the Chinese would suddenly demand their $ back, because sovereign investors, just like individuals, seek out safe havens for their money. And, with an economy as large as China's, there are few options among the world's financial markets that can absorb all the excess funds they need as a safety net, and provide a predictable return. Really, nobody but the US. Germany, England, Singapore etc - the economies and financial markets are much too small to absorb those levels of inflows.
This is not at all a surprise to me. Ag producers here have known for at least 20 years that four or maybe five big companies control the markets. Only two of them are American owned. I knew about China owning Smithfield, which has a big presence in Omaha and Lincoln. Another one is JBS, which is owned by Brazil. Brazil is a direct competitor to American cattle producers and corn and soybean farmers. At least we're not cutting down rain forests to do it.
ReplyDeleteThe individual farmers and ranchers have little control over what the big players do. Typically the big four are buying up larger conglomerates (which have previously bought up smaller operations).
The US needs to be paying close attention. The Department of Agriculture is supposed to develop policy. I'm not sure if they are. Vilsack is better than Trump's pick (Perdue, I think) but that's not saying much.
There are about 896 million acres of farmland in the US. A bit more than 2% is owned by foreign entities. China is well behind other foreign countries and several others (Bill Gates, the Mormon Church, etc) in American farmland ownership. Most of the 192,000 acres owned by China is Smithfield property (as Katherine noted) around the country (HQ in Smithfield, VA and a popular brand in the DelMarVa. region). The Chinese do love pork, but it wouldn't really hurt Americans to eat less of it! If they ship it all to China, the price here might go up and maybe fewer Americans would clog their arteries with the stuff. :)
ReplyDeleteCanada is the biggest investor in US farmland, followed by the Netherlands. Brazil also owns a lot of American farmland. Some countries invest in timberland rather than cleared land for crops or grazing.
"Critics often cite food security as a reason to ban foreign ownership of agriculture land, but the Center’s analysis found that timber companies and renewable energy companies remain the biggest group of foreign investors.In 2016, Luxembourg had the largest increase of any country in foreign investment at 262,000 acres – all forestland – ... while Italy was second at 257,000 acres – almost entirely cropland "
.https://investigatemidwest.org/2019/06/03/as-foreign-investment-in-u-s-farmland-grows-efforts-to-ban-and-limit-the-increase-mount/
Deseret Ranches include almost 300,000 acres and roughly 44,000 head of beef cattle. This is the largest cattle ranch in the US and is owned by the Church of the Latter Day Saints. It is in northern Florida (I originally earned this bit of farm knowledge from my ranch management-tech son).
The largest private individual farmland owner is Bill Gates, who owns 242,000 acres of American farmland, still well ahead of the Chinese.
Forgot this part - “ Overall, Canadian individuals and entities own the most land at 4.7 million acres, valued at $4.6 billion. Netherlands is a close second at 4.5 million acres, valued at $6 billion.”
DeleteChina is a bit player so far.